The S&P 500 – 2017 vs. 2018
What a difference a year makes! It was clear to most of us that 2018 was not a great year for the S&P 500 and the stock market in general. One reason it felt worse than it actually was is because our memories are short. We tend to think that what happened in the most recent past will keep happening (a phenomenon known as recency bias). When it doesn’t, what would otherwise be considered relatively normal activity feels like a kick in the stomach.
Some interesting data points
What should you take away from the information provided?
- First, the disparity is not all that unusual. The ups and downs are a normal function of a market.
- Second, if looking at your year-end investment account statements or the chart above is panic inducing, you should re-evaluate your allocation to stocks.
- Third, don’t read too much into it. Yes, it is interesting (at least to me) and it might make for good conversation, but it really is just a few interesting comparison points (and ones I cherry-picked at that) to remind us that we never know what will happen from one year to the next. Making long-term decisions about your portfolio based on charts like this will only get you into trouble.
And, for everyone who assumed that January and February of 2019 would be a continuation of the last quarter of 2018…they were wrong. The S&P 500 gained 8% in January and another 3% in February.